New research reveal the number of new credit card accounts (those opened in the previous 24 months) rose 10.7% year-over-year to 87.3 million, with subprime account openings growing the fastest with 27 million new accounts. Subprime accounts remain well below pre-recession levels, comprising 20% of total accounts – roughly equal to 2012 – while prime and super-prime accounts make up 29% and 50% of the credit card market, respectively.
According to the American Bankers Association’s latest Credit Card Market Monitor, on an annual basis, monthly purchase volumes rose between 6 and 9 percent across risk tiers (subprime, prime, and super-prime), consistent with a tightening labor market and rising consumption levels.
The ABA report also found that consumers are increasingly using credit cards as a short-term financing vehicle. The share of account holders who carry a monthly balance (“Revolvers”) rose 0.8 percentage points to 43.3% of all accounts, near a four-year high but still well below levels from 2009 – 2012.
Coupled with tightening U.S. monetary policy, the increase in Revolvers translated to a modest rise in the effective finance charge yield from 11.30% to 11.39% — although this metric (which measures the amount of interest issuers are collecting relative to the total amount of outstanding credit) has been mostly flat for the last five years.
The share of Transactor accounts (account holders who pay off their balances in full each month) fell 0.3 percentage points to 29.2% of all accounts, but remained near a post-recession high. The remain accounts (27.5%) were dormant.
Although credit card use is increasing, the data suggest that U.S. consumers are prudently managing their credit card debt. Credit card credit outstanding as a share of disposable income — a measure of credit card debt relative to account holders’ financial means — remains near post-recession lows and has not climbed above 5.45% or fallen below 5.15% in nearly five years.
The January 2017 ABA Credit Card Monitor reflects credit card data from July through September 2016.